FundingKnight does not provide tax advice and the statements here are simply guidelines for ordinary investors. If you have any questions about your tax situation, you should contact your tax adviser or local tax office.
For UK tax payers, the interest you receive from peer-to-peer investments is income, and income tax is payable on that interest.
From April 2016, the first £1,000 of income from peer-to-peer investments (£500 for higher-rate taxpayers) is tax-free. Above this amount investors will need to declare their peer-to-peer earnings to HMRC annually.
We do not currently make any deductions for tax for UK residents.
Secondary marketplace trades
Our understanding is that any gains or losses made through buying or selling on the Marketplace are not subject to UK Capital Gains Tax.
Losses on bad debts
Some FundingKnight loans classified as “In Recovery” can be treated as irrecoverable for tax purposes. Loans “In Recovery” will be treated differently depending on the precise date when the original borrower ceased to be able to pay.
Where the borrower ceased to be able to pay or before 5th April 2015:
- A claim for loss against Income Tax is not possible.
- A claim for loss against Capital Gains Tax is only possible once all payments have stopped.
- In practice if the only payments due are from an Insolvency Practitioner and it is expected that investors will get some pence in the pound, then it is usually acceptable to claim for the expected net loss. For example, if you are only anticipating 10p per pound, then a claim for 90% of the capital as a loss should be acceptable. If the final loss is different, then if you get back more the difference will be a capital gain (or a further capital loss if less).
Where the borrower ceased to be able to pay between 6th April 2015 and 5th April 2016:
- A claim for loss against Income Tax is possible. This must be made by the investor to HMRC.
- The Capital Gains Tax position is as above.
Where the borrower ceased to be able to pay on or after 6th April 2016:
- The loss is automatically considered irrecoverable for Income Tax purposes. The loss claim will, in most instances, be made by the platform (e.g. FundingKnight).
- Capital Gains Tax relief will no longer be available in most instances.
Tax reports and downloads
You can find tax reports, detailing the interest and capital repayments, on our investment platform under My money – My tax reports.
It is possible to change the date range on these reports to suit specific requirements. If the dates selected include a future date, the tax report only provides data on the actual income received to date – it is not a tax forecast of any payments you might receive.
For reporting losses made before April 2015, or for more clarification about any of this information, please speak to a financial consultant/tax adviser.